New financial regulations could cut big bank earnings by 13%

New financial regulations could cut big bank earnings by 13%, with Citigroup Inc., Bank of America and Morgan Stanley among the hardest hit, as reported by Goldman Sachs analysts.

According to Jason Goldberg, a banking analyst at Barclays Capital, there could be a 14% hit to industry net income in 2013 from the legislation. Parts of the legislation that could have the biggest impact include derivatives reform, limits on proprietary trading and a potentially potent, new consumer-finance watchdog.

Banks will most likely pass on some of the new regulatory burden to customers in the form of higher annual fees and higher spreads on lending.

JPMorgan is also estimated to pay about 600 million for its share of the $19 billion assessment on financial institutions with more than $50 billion in assets and hedge funds with over $10 billion in assets.

Obama Bank Plan Could Reduce Future Earnings and Growth

President Obama's plan to restrict the activities of commercial banks, specifically outlawing proprietary trading and preventing commercial banks and institutions that own banks from owning, investing in or sponsoring private equity and hedge funds as well as limiting the size of banks could greatly reduce future revenues and growth potential for US and foreign banks.

Doing Their Customer Base Wrong!!!!

This company really needs to watch the movie "It's a Wonderful Life" for a suggestion on how a bank is supposed to act. They have really been doing a lot of their customers wrong. Jacking up the minimum percentage due on their customers credit card balances even when the customer has paid their payments on time has left a bad taste in their mouth. Word of mouth is going to kill this bank. While in the short term this bank may do fine, but long term I don't think so. Check out the massive complaints going on about them. Banks that help people in their time of need will be the ones to invest in long term.

Exposure to Europe

With financial and economic turmoil in Europe, it has much more downside compared to other big banks. Each crisis brings a heavy blow to JPM. High foreclosures and commercial RE disasters are yet to hit the banks. International exposure will only multiply the impact on the bank manifold.

Lehman Sues JPMorgan Chase for billions

Lehman Brothers sued JPMorgan Chase & Co. accusing JPMorgan of illegally siphoning billions of dollars of desperately-needed assets in the days leading up to its record bankruptcy. The lawsuit filed in Manhattan bankruptcy court accused JPMorgan of using its 'unparalleled access' to inside details of Lehman's distress to extract $8.6 billion of collateral in the four business days ahead of Lehman's Sept. 15, 2008, bankruptcy, including $5 billion on the final business day. According to the complaint, JPMorgan knew from this relationship that Lehman's viability was fast weakening, and threatened to deprive Lehman of critical clearing services unless it posted an excessive amount of collateral.

JP Morgan may shrink its Commercial Bank side

Top Contributor: R C | Created when NYSE:JPM was $24.13 | Edit | History

JP Morgan' commercial banking chief Todd Maclin announced that the bank will likely shrink the number of commercial loans given out. This is largely a product of decreased demand for loans, but it will force JP Morgan to remain heavily rooted in the Investment Banking side. This portion will continue to face difficulty making large profit margins - especially with increased regulation and oversight from the Executive Branch due to the Troubled Asset Relief Program (TARP).

Highly exposed to risk and market volatility

JPMorgan's investment bank has been undertaking an increasing amount of risk in order to improve profits per dollar. This increasing exposure to market volatility has the potential to result in severe losses if the market takes a severe hit.

New Credit Card Regulations will decrease profitability of credit card business

New consumer protections going into effect will limit various fees that banks can charge and prevent banks from arbitrarily raising interests. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 will require companies to make additional disclosures and prevent them from charging customers additional fees. Many aspects of the regulations will come into effect on February 22, 2010, including regulations relating to interest rate increases, fees on over-the-limit transactions and marketing practices related to college students. Credit card companies will no longer be able to raise interest rates on existing balances unless a cardholder is at least 60 days late.

As a result of these new regulations, credit card companies will likely take a major hit in revenue since banks such as Bank of America, JP Morgan Chase, Citigroup and others depend heavily on revenue that they earn from late-fees, over-the-limit fee and balance transfer fees.

Analysts at JPMorgan expect new laws to result in a $750 million cut in profits along with many customers being cut off.

Unsual Home Equity Loan Billing

Most fixed term retail loans bill customers a fixed amount that includes principal and interest but not at Chase. If your bill is $100/month and you pay $500 in a given month the your next statement will say no payment required. Strange since most other banks will appply overage to principal and send bill next month for $100. Don't forget interest is accruing so chase customers are making 'requested/billed' payments but still not mkaing minimum interest payments. Aren't similar practices used by credit cards under scrutiny

Retail banking isn't as good as it used to be

The acquisition of Bank of New York, including a great deal of debt, exacerbates the problems facing the struggling retail financial services business. Chase's existing retail branches have been underperforming in several markets already, and adding additional branches is extremely risky.

Subprime and interest rates pose key risks

The weak housing market is unlikely to change in the near future, with a flat or even inverted yield curve indicating uncertainty about the future of interest rates in the U.S. and the subprime mortgage lending market contributing to the depressed mortgage banking business.